Nigeria has launched a $672 million fund to support its tech startups amid the upheaval caused by the recent collapse of three key US banks.
The fund was launched on March 14 under the government’s Digital and Creative Enterprises Programme (DCEP). Its corpus will include $170 million in contributions from the African Development Bank (AfDB), $116 million from the Agence Francaise de Developpement, $70 million from the Islamic Development Bank, and $271 million from the country’s private sector. The government itself will provide $45 million.
Africa’s biggest economy has been the quickest in the continent to react to the crisis, aiming largely to reduce the dependence on startup funding from the US.
The three now-defunct US-based lenders, Silicon Valley Bank (SVB), Silvergate Bank, and Signature Bank, had been supporting tech-focused venture capitalism in Africa. Their collapse spells a dark moment for that ecosystem.
Cushioning startups against collapse
Nigeria wants to cushion its startups against the kind of situation that Chipper Cash, a victim of the fall of SVB and the bankruptcy of cryptocurrency exchange FTX, finds itself in. The battered fintech firm is now considering selling itself out.
Venture capital firm Y-Combinator has said the reduced cash flow since the fall of the US banks will hit more than 10,000 startups. Its president Garry Tan tweeted saying “30% of YC companies exposed through SVB can’t make payroll in the next 30 days.” The accelerator, which funds 80 African startups, has cut nearly 20% of its own workforce.
Nigeria’s new fund, which targets founders aged between 15 and 35, has, therefore, been created to help its tech industry avoid growth contractions.
AfDB’s funding is expected to attract direct investments in more than 200 tech startups in the west African nation and also provide non-financial services to some 450 small and medium digital technology enterprises.
For the second year running in 2022, Nigeria was Africa’s most funded country, with 180 startups receiving up to $976 million, almost 30% of the $3 billion the continent received.